How to Buy Your Own Home

Posted by Melissa Rubin in family investments.

How to Buy Your Own Home

Your home is the largest family investment you will ever make. It is one of those investments where you can lose money, or make money, but it is the only investment that you see grow every day. Your home is your families’ place of security, and owning it gives you power to mold a house into a home – but are you ready to own your own home?

With all the other family expenses one has to deal with, is it logical for you to make the step into buying a home? The first thing one needs to think about is price, but there’s a lot more that goes into buying a home than the price tag.

The following is a check list you and your family need to go over before going through the major family expense of buying a home:

  1. Determine what your needs are
  2. Determine whether or not owning a home will help meet those needs
  3. Determine the responsibilities you want in a home (do you picture yourself mowing the lawn, or running on the beach every Saturday morning)
  4. Look at buying a home as a lifestyle investment first, then secondly as a financial investment

Does owning a home coincide with your family budget?

It might be a backwards way of thinking, but owning a home can actually help your family savings. How, you might ask? By forcing you to save! A mortgage lasts anywhere from 15-30 years and forces you to save for those monthly payments. As previously mentioned, your house is a huge investment, probably the biggest you will ever make. Like most investments there is a chance you will lose and a chance you will win.

Another thing to consider when deciding whether or not a house fits into your family budget is thinking long term. Once your mortgage is paid off, it turns your house into a substantial asset in which you can sell and use the profits for a child’s college tuition, retirement, or any other family expense!

How much mortgage can you afford?

Every homeowner has a mortgage to pay, but determining how much your monthly payments are is not entirely based on what you think your family budget can handle. Fannie Mae bases their mortgages on a ratio of two requirements: basic monthly housing costs and your gross monthly income. Basic costs include, but are not limited to:

Keep in mind that monthly payments on student loans, installment loans, and credit card balances older than 10 months are added to basic housing costs and then divided by gross income. Your gross monthly income, which means your income before taxes and other deductions are taken out, include, but are not limited to:

Prequalification, or arranging your mortgage before actually buying a home, can help you zone in on the families and neighborhoods you can afford before you waste time looking where you can’t afford to live.

What are the ongoing costs of owning a home?

Unfortunately, the mortgage payments and down payment are not the only cash deposits needed when purchasing a home. There are also home inspection costs, closing costs, application fees, appraisal fees, costs for a title search and title insurance, first month’s home owners insurance, recording fees and attorney fees are most of the other expenses, but there will without a doubt be surprise costs along the way.

It might seem like a lot, but the normal percentage of all these costs is 3-8% of the total purchase price. Keep this in mind when figuring out how much of your family expenses you can put towards purchasing a new house.

Stats to keep in mind: